The E-Myth Enterprise: How to Turn a Great Idea into a Thriving Business

Summary

“This excellent book is a must-read for current and aspiring entrepreneurs.”—Booklist

Discover how to turn a great idea into a thriving business with The E-Myth Enterprise, using the proven methods that bestselling author Michael E. Gerber has developed over the course of his more than forty years as an entrepreneur and coach. Michael E.Gerber is THE #1 name in small business and his company, E-Myth Worldwide, boasts more than 52,000 business clients in 145 countries. TheE-Myth Enterprise shows readers how to get started—because simply coming up with a brilliant business idea is the easy part.

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The E-Myth Enterprise - Michael E. Gerber

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PREFACE

HOW PIG AND BEAR WENT INTO BUSINESS

Pig and Bear decided to go into business.

We’ll make lots of money! they thought.

Pig baked a bushel of potatoes, and Bear fried a heap of doughnuts.

They went to the marketplace early in the morning to get the best spots. Nobody was around yet. The morning was clear and chilly. Bear had a nickel in his coat. After a while he went over to Pig’s stand to warm up a little.

How much for a potato? he growled.

A nickel for you.

Bear was about to say that he’d just wanted to ask, but then he changed his mind. He fished for the nickel in his fur, took the biggest steaming potato in his paws, and crossed the road back to his stand.

The business is moving, rejoiced Pig. But since there were no more customers for a while, and he hadn’t eaten since they started at dawn, he crossed over to Bear’s stand and bought himself a black raspberry doughnut for a nickel.

Bear was happy to have his first customer. He felt he should eat something before they started to flock. He went over to buy another baked potato. The move brought him luck. He had hardly finished when Pig was over for another doughnut.

The business slacked off again until Bear bought a potato. Soon Pig was over again, and Bear went right back to his stand with him to spend the earned nickel. Pig returned for a doughnut, and soon they were going back and forth until they sold everything.

They counted the money, but:

How strange, I only have a nickel, Bear said.

And I have nothing at all, said Pig.

They couldn’t believe it.

We have sold all our merchandise, they kept saying, but we have no money!

But in vain they counted and recounted: they had only a nickel between them after the whole day of busy trading.

—Adapted from Twelve Iron Sandals by Vit Hor? ejš

INTRODUCTION

If you’ve read any of my E-Myth books, you know me well enough to anticipate what I’m about to share with you. If you haven’t read my E-Myth books, this book will come as a surprise.

The E-Myth Enterprise is a book about the business of invention. More importantly, it’s a book about rare people who I have come to think of as true E-Myth Entrepreneurs, people who were moved to re-create their world by inventing a business unlike any they had ever seen other than in their imagination.

Unlike any business you have ever seen.

Trust me when I say this: the E-Myth Enterprises you will come in touch with here are as uncommon a reality as winning the Olympics.

Companies like these don’t simply happen; they are the product of deep, delirious imagining. They are the outcome of passions intensely applied. Of perseverance impossible to fake. Of overcoming the relentless obstacles that are continually conspiring to make the impossible impossible. To make the unfathomable unfathomable. To make the difficult more than just difficult, but horrendously difficult. Of creating an original result in the world.

I think you get what I mean. Don’t try this at home, is what the warning reads at the bottom of the page. Unless you’re determined to exceed, that is.

To exceed what? is the question.

Well, of course: to exceed the everyday. The normal. The obvious.

And if that’s the case, this book tells you what it looks like when you’re done and how to think about it in the process.

How to invent an E-Myth Enterprise.

How to invent a company that acts like one in ten million.

Welcome to the club. The E-Myth Club. The Michael Gerber Club. The club of great entrepreneurs.

THE FOUR ESSENTIAL INGREDIENTS

I was having a conversation with my friend and agent, Steve Hanselman, not that long ago, about my commitment to create a new master’s degree, one that would leave an MBA and all those who would pursue it smothered in the dust.

I called that new degree an MBD, or master’s of business design.

It would be the only business program an entrepreneur or an entrepreneurial manager would ever need. It would teach the essential skills needed to invent a stunningly original company, what I in this book call an E-Myth Enterprise.

There are four essential ingredients to building such a company: they are the visual, emotional, functional, and financial. When you design a company, you design it visually, emotionally, functionally, and financially. These four essential components call for a systems thinker if they are to be designed to work as all great companies work: synergistically, in an integrated, intelligent, original, emotionally compelling way to deliver the original promise they were designed to deliver, a result that surprises the people it was intended to surprise, that glues them to it in ways they had never expected because it serves them in ways they had never expected. And it keeps on doing it because it was built in a very special way.

In this book I will discuss the beginnings of that MBD, at least to the point where you will clearly understand the logic underlying it and why it is so critical for you should you aspire to become such an inventor, such an E-Myth Entrepreneur, as the folks in this book have become.

The idea is not that difficult to grasp. A company is a product of an entrepreneur’s imagination. It is a visual product, an emotional product, a functional product, and a financial product.

Although the idea is not that difficult, it seems that most people I tell that to do find it difficult and, for many, impossible to get. I believe that to be caused by the gross, commercial, flat, unstimulating, unimaginative context most of us hold on to when relating to the subject of business.

Business, to most people, is what their parents did or do.

Business, to most people, is the job they’ve got to go to today.

Business, to most people, is where we work.

Business, to most people, is where we would least like to be if what we really wanted to be doing is having fun.

This book suggests something significantly different than that.

Business is the most creative and challenging pursuit in which one can engage. It is also downright fun—if done right.

Follow me. Let’s do it right! Let’s have fun!

—Michael Gerber

CHAPTER ONE

THE E-MYTH ENTERPRISE AND THE POSITION OF ONE: A BUSINESS EXISTS ONLY AS IT IS PERCEIVED BY OTHERS

In too many situations we automatically experience people as them—not us. These jungle-type habits of mind are dangerous to our species.

—Ken Keyes Jr.

This book is meant to be a prescription for building a successful business in a free market system. As you will find out, it probably serves as well—if not better—as a polemic against such prescriptions.

Please excuse the apparent contradiction. I know that if you’re patient, somewhere in the middle resides a truth worth digging for. But to get there, you’re going to have to do some of the work. You’re going to have to stretch where I stretch and let go where I let go.

In other words, you’re going to have to be willing to play an always frustrating, but sometimes enlightening, game, a game I call how do you provide an answer to a question that you know has no answer?

In a free market system, that’s the game called business.

To anyone with even a passing interest in the comings and goings of the free market system in the United States, it should be apparent that the life of a business here is a precarious thing. If the business is a good idea—that is, if it does all the right things in the right way and at the right time, and is lucky—it succeeds.

If it’s a bad idea, it doesn’t.

Even worse, it could appear to be a good idea, but shifts—more like earthquakes—in the economy can sink it. Wasn’t Washington Mutual a good idea? Wasn’t Fannie Mae? Wasn’t Lehman Brothers? Wasn’t AIG?

Unfortunately, the truth is that for the people who invest in other people’s businesses, for those who start a business of their own, or for those who work for either of the other two, most businesses turn out to be bad ideas; most businesses fail. Even the so-called giants.

More frustrating is that, in a free market system, even the good ideas—the businesses that succeed—turn into the bad ideas in time.

The weather changes. A new company moves in across the street. People stop having babies. Somebody comes up with a better idea. The economy experiences a so-called correction. Or—and this happens—someone comes up with a worse idea but implements it better.

In short, a free market system provides all of us with significantly more opportunity to fail than to succeed.

What worked yesterday will most likely not work today, and the fact that something works today is insufficient justification for planning to do it the same way tomorrow.

How can we minimize the risk?

If an estimated six out of ten companies funded by professional venture capitalists go under (some estimates run as high as 90 percent*), how can anyone else expect to do better? Shouldn’t we be able to expect better in a world with so much information at hand, with so much technical and technological know-how at our disposal, and with so many well-trained managers available? *

For years, clients have been asking me those very questions.

Is there a common denominator we can use to take a more accurate measure of a business idea?

Is there a pattern—a template—we can use to evaluate a business and its likelihood of achieving significant success?

Is there something all great businesses do that can be replicated by other businesses wishing to become great?

Is there a way to clone greatness?

I believe the answer to each of these questions is yes.

This book is my answer to those thousands of clients and businesspeople who have asked me these questions over the years, as well as to the millions of entrepreneurs, would-be entrepreneurs, and managers I have never met to whom these questions are just as important.

In a deceptively thin book, I have organized the fundamental principles that I believe form the foundation of every lasting great business into a template or model of greatness, the presence of which in any business would indicate with a great degree of certainty what I call the success-proneness of that business, and the absence of which would indicate that a business is not likely to pass the test of time.

The value of this template is that it is timeless. It will work for any enterprise, any time, at any place in the world.

It could have been implemented as effectively in the nineteenth century as it is now.

It could be put to good work just as effectively in the emerging Eastern European free market experiment, as it could in the United States free market’s attempt to recapture its own lost glory.

It could just as well be applied to a corner grocery store as to a semiconductor plant in Chandler, Arizona, or an iPod factory in China.

The reason it is so timeless and so transferable is because it is founded upon the one sacrosanct requirement upon which the existence of every business in a free market system always has depended, and always will depend.

That is, to succeed, every business in a free market system must learn how to satisfy, better than its competitors, the essential needs, unconscious expectations, and perceived preferences of the four most important groups of people in its universe: (1) the people who work for it; (2) the people who buy from it; (3) the people who sell to it; and (4) the people who lend to it: its employees, customers, suppliers, and financial institutions.

It is the combined judgment of all these people, these four primary influencers, upon which the ultimate success or failure—yes, the life or death—of